Zimbabwe gold producers warn currency shortage threatens output

Zimbabwean gold producers may suspend operations because a foreign-exchange shortage has left them with insufficient funds to cover production costs, the main industry lobby group said.

Curbing output would deprive the country of a key source of export earnings as Finance Minister Mthuli Ncube tries to stabilize an economy wrecked by the misrule of former leader Robert Mugabe.

Zimbabwe’s mining industry is facing “severe viability challenges” because of the shortage of hard currency, the Gold Producers Committee, an affiliate of the Chamber of Mines of Zimbabwe, said in a report to be submitted to the central bank and seen by Bloomberg. Producers are only allowed to retain 30 percent of the proceeds of gold sales, which isn’t adequate to cover the cost of mining the metal, it said.

“If this situation is not addressed the majority of (gold) mining houses, whose going concern have been undermined, may find it impossible to continue in production,” the committee said. It proposed allowing mineral producers to retain a larger share of the proceeds from metal sales.

Zimbabwe is projected to produce 30 metric tons of gold in 2018, up from 24.8 tons last year. The metal is Zimbabwe’s second-biggest export, after tobacco, according to World Trade Organization data.